WASHINGTON, March 27 State securities regulators
have hired a former Securities and Exchange Commission lawyer to
help them win a rare and high-stakes jurisdictional dispute with
the SEC.

The North American Securities Administrators Association, or
NASAA, recently tapped former SEC enforcement lawyer Tom Sporkin
to help respond to an SEC proposal on small public stock
offerings that the state group says defies the will of Congress,
exceeds the SEC's authority and reduces state policing powers.

Sporkin, a partner at BuckleySandler LLP in Washington,
spent nearly 20 years at the SEC, including a stint as director
of the Office of Market Intelligence, a triage center for
handling the SEC's tips and complaints.

"He has good experience understanding the inner workings" of
the SEC, NASAA President Andrea Seidt said in an interview. "We
certainly value his input. He is helping us solidify our
thinking."

State regulators frequently clash with lawmakers to retain
their jurisdiction, which has been scaled back before, but it is
unusual for them to tussle with the SEC over jurisdictional
issues so publicly.

The dispute centers on how regulators should oversee a type
of small public stock deal known as a "Regulation A" offering.
The deals are rarely used because companies can only use them to
raise $5 million, and the offerings must be registered
separately in every state where they are sold - often more
effort than the relatively small amount of money is worth.

The SEC wants to raise that threshold to $50 million and
exempt the deals from state registration laws so that more
companies can use "Reg A" to raise new capital.

State regulators do not want to lose oversight authority of
these deals due to concerns about fraud. Beyond that point, they
say it would be against the law for the SEC to pre-empt state
oversight.

"This is one of those rare occasions where the SEC has
gotten a little out of synch with this rule," Sporkin told
Reuters in an interview.

"I know that NASAA is committed to working with the
Commission to revise the proposal in a way that will preserve
this important partnership," he said.

"We look forward to reviewing all of the comments we receive
on the proposal," said SEC spokesman John Nester.

The SEC's Regulation A proposal stems from the 2012
Jumpstart Our Business Startups, or JOBS Act, which relaxes
securities rules to help companies raise money and go public.

NASAA has disagreed with many provisions of the JOBS Act,
but this is the first time it has hired outside counsel to help
it push back against a rule related to the law.

The law requires the SEC to increase the amount that
Regulation A offerings can raise. But regulators were flummoxed
over how to handle the patchwork of different "blue sky" state
laws so that compliance costs would not cancel out the benefits
to companies of raising more money.

NASAA has offered a solution. Last year, it said the states
were developing a streamlined system that would let companies
register offerings once, instead of in every state separately.
But the SEC surprised the group by proposing that many of the
Reg A deals would be removed from state supervision.

"It's not appropriate for the SEC at any time ... to exceed
its statutory authority," Seidt said. "Pre-emption is not an
option on the table."

The group's recent 17-page comment letter to the SEC, which
Sporkin helped review, accuses the SEC of defying Congress.

It does not make a specific legal threat, but the letter
references tactics used in previous challenges, such as asking
whether the SEC weighed the costs and benefits of its proposal.

The letter also suggests that companies may be afraid of
facing enforcement action from individual states if they try to
sell unregistered shares there, even if the offering complies
with SEC rules.

That could deter companies from issuing Reg A offerings,
according to NASAA.

The state securities regulators' group plans to meet with
SEC commissioners, including Chair Mary Jo White, and staff
early next month, before the NASAA's public policy conference in
Washington on April 8, to discuss its concerns.

Seidt said she was hopeful the matter could be resolved
without resorting to litigation.

"Right now our perspective is partnering with the SEC in a
productive, constructive way and hoping that it doesn't have to
take a detour south," Seidt said.
(Reporting by Sarah N. Lynch; Editing by Linda Stern, G Crosse
and Peter Cooney)

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